U.S. Steel's Historic Sale Faces Government Scrutiny Over National Security Concerns
The proposed acquisition of U.S. Steel by Japan's Nippon Steel has sparked debate among U.S. policymakers regarding national security and the future of America's industrial base.
Taylor Brooks
- 2024-01-05
- Updated 05:11 PM ET
(NewsNibs) - In a historic move dating back to its formation in 1901 by J.P. Morgan from Andrew Carnegie's Carnegie Steel Company, U.S. Steel, once the world's largest steel producer, was recently sold to Nippon Steel. However, this transaction has encountered significant opposition from American lawmakers. Senators J.D. Vance, Josh Hawley, and Marco Rubio have called upon the Committee on Foreign Investment in the United States (CFIUS) to prevent the deal, an action also supported by the Biden administration. Their concerns hinge on national security and the preservation of America's manufacturing capabilities, particularly in light of the significant reduction in U.S. global steel production share and U.S. Steel's fall to 27th in worldwide productivity.
National Security Implications
The critical role of steel in national defense was exemplified during WWII when domestic steel production was heavily leveraged by the U.S. government, accounting for roughly 60 percent of output. Today, the Department of Commerce has warned that current domestic steel production may be inadequate to meet defense needs in a major conflict. This concern is compounded by the weakened state of the U.S. defense industrial base, which has suffered from past consolidation efforts and is now struggling to support allies amid two international wars. CFIUS, empowered by legislation under President Ronald Reagan, has the authority to reject foreign acquisitions that pose risks to national security. This power went unused during Russia's acquisition of almost 10 percent of American steel production in 2008, a historical note that underscores the dilemma facing today's decision-makers.
Securing Critical Supply Chains
U.S. policy acknowledges the need to solidify critical supply chains, a necessity that has been spotlighted by the vulnerabilities exposed during the COVID-19 pandemic. While the recent focus has centered on protecting cutting-edge technologies, there is a growing call to establish broader safeguards for foundational industries such as steel. This push for security extends beyond technology to encompass traditional sectors that are foundational to the country's infrastructure and defense capabilities.
The ongoing debate around the sale of U.S. Steel to Nippon Steel raises questions about the balance between global business interests and national security. Moreover, it reflects broader concerns over the resilience of critical industries in times of crisis. Policy makers are now challenged to review and potentially adapt legislation to better protect the nation's industrial capabilities while navigating international economic relationships.
